Market Overview

Glacier Bancorp, Inc. Announces Results for the Quarter Ended September 30, 2015

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HIGHLIGHTS:

  • Net income of $29.6 million for the current quarter, an increase of 1 percent from the prior quarter $29.3 million net income and an increase of 1 percent from the prior year third quarter net income of $29.3 million.
  • Current quarter diluted earnings per share of $0.39, compared to the prior quarter diluted earnings per share of $0.39 and the prior year third quarter diluted earnings per share of $0.40.
  • The loan portfolio increased $69 million, or 6 percent annualized, during the current quarter.
  • Non-interest bearing deposits of $1.894 billion, increased $162.7 million, or 9 percent, during the current quarter.
  • Dividend declared of $0.19 per share.  The dividend was the 122nd consecutive quarterly dividend declared by the Company.
  • The Company announced the definitive agreement to acquire Cañon National Bank, a community bank based in Cañon City, Colorado, with total assets of $260 million at September 30, 2015.

Results Summary

  Three Months ended Nine Months ended
(Dollars in thousands, except per share data) Sep 30,
 2015
 Jun 30,
 2015
 Mar 31,
 2015
 Sep 30,
 2014
 Sep 30,
 2015
 Sep 30,
 2014
                    
Net income $29,614  29,335  27,670  29,294  86,619  84,701 
Diluted earnings per share $0.39  0.39  0.37  0.40  1.15  1.14 
Return on average assets (annualized) 1.36% 1.39% 1.36% 1.46% 1.37% 1.44%
Return on average equity (annualized) 10.93% 11.05% 10.72% 11.30% 10.90% 11.27%
                   

KALISPELL, Mont., Oct. 22, 2015 (GLOBE NEWSWIRE) -- Glacier Bancorp, Inc. (Nasdaq: GBCI) reported net income of $29.6 million for the current quarter, an increase of $320 thousand, or 1 percent, from the $29.3 million of net income for the prior year third quarter.  Diluted earnings per share for the current quarter was $0.39 per share, a decrease of $0.01, or 3 percent, from the prior year third quarter diluted earnings per share of $0.40.  Included in the current quarter non-interest expense was $259 thousand of one-time acquisition and conversion related expenses.  "Once again this quarter we delivered solid performance metrics similar to what we have achieved over the past nine quarters," said Mick Blodnick, President and Chief Executive Officer.  "Record top line revenues helped offset higher taxes in the third quarter and allowed us to generate another quarter of record earnings.  The growth in revenues came primarily from increases in interest on our investment and commercial loan portfolios as well as greater service charge fee income on deposit accounts," Blodnick said.

Net income for the nine months ended September 30, 2015 was $86.6 million, an increase of $1.9 million, or 2 percent, from the $84.7 million of net income for the same period in the prior year.  Diluted earnings per share for the nine months ended September 30, 2015 was $1.15 per share, an increase of $0.01, or 1 percent, from the diluted earnings per share for the same period in the prior year.

On February 28, 2015, the Company completed the acquisition of Montana Community Banks, Inc. and its subsidiary, Community Bank, Inc. (collectively, "CB").  The Company incurred $1.5 million of legal and professional expenses in connection with the CB acquisition and conversion during the current year.  Goodwill of $1.1 million resulted from the acquisition which was based on the estimated fair value of the assets acquired and liabilities assumed.  The Company's results of operations and financial condition include the acquisition of CB from the acquisition date and the following table provides information on the fair value of selected classifications of assets and liabilities acquired:

(Dollars in thousands)February 28,
 2015
   
Total assets$175,774  
Investment securities 42,350  
Loans receivable 84,689  
Non-interest bearing deposits 41,779  
Interest bearing deposits 105,041  
Federal Home Loan Bank advances and other borrowed funds 3,292  
   

Asset Summary

         $ Change from
(Dollars in thousands)Sep 30,
 2015
 Jun 30,
 2015
 Dec 31,
 2014
 Sep 30,
 2014
 Jun 30,
 2015
 Dec 31,
 2014
 Sep 30,
 2014
                    
Cash and cash equivalents  $ 242,835   355,719  442,409  282,097  (112,884) (199,574) (39,262)
Investment securities, available-for-sale   2,530,994   2,361,830  2,387,428  2,398,196  169,164  143,566  132,798 
Investment securities, held-to-maturity   651,822   593,314  520,997  482,757  58,508  130,825  169,065 
Total investment securities   3,182,816   2,955,144  2,908,425  2,880,953  227,672  274,391  301,863 
              
Loans receivable              
Residential real estate   644,694   635,674  611,463  603,806  9,020  33,231  40,888 
Commercial   3,581,667   3,529,274  3,263,448  3,248,529  52,393  318,219  333,138 
Consumer and other   650,058   642,483  613,184  606,764  7,575  36,874  43,294 
Loans receivable   4,876,419   4,807,431  4,488,095  4,459,099  68,988  388,324  417,320 
Allowance for loan and lease losses   (130,768)  (130,519) (129,753) (130,632) (249) (1,015) (136)
Loans receivable, net   4,745,651   4,676,912  4,358,342  4,328,467  68,739  387,309  417,184 
                      
Other assets   592,997   602,035  597,331  618,293  (9,038) (4,334) (25,296)
Total assets $ 8,764,299   8,589,810  8,306,507  8,109,810  174,489  457,792  654,489 
                     

Total investment securities of $3.183 billion at September 30, 2015 increased $228 million, or 8 percent, during the current quarter and increased $302 million, or 10 percent, from September 30, 2014.  The increase in the investment portfolio from the prior quarter and the prior year third quarter was the result of continuing to selectively purchase investment securities with the Company's excess liquidity resulting from the sustained increase in deposits.  Investment securities represented 36 percent of total assets at September 30, 2015 compared to 35 percent at December 31, 2014 and 36 percent at September 30, 2014.

The Company continues to experience growth in the loan portfolio which increased $69.0 million, or 1 percent, during the current quarter.  The loan category with the largest dollar increase during the current quarter was commercial real estate loans which increased $46.6 million, or 2 percent.  The loan category with the largest percentage increase was residential construction (i.e., regulatory classification) which increased 10 percent over the prior quarter.  Excluding the CB acquisition, the loan portfolio increased $304 million, or 7 percent, since December 31, 2014 with $252 million of the increase coming from growth in commercial loans.  "Our loan growth was a little softer than what we had hoped for this quarter as a couple of large credits paid off," Blodnick said.  "Loan production in the third quarter actually exceeded the first two quarters of the year, unfortunately so did pay offs.  The good news is the loan pipeline still looks decent as we head into what traditionally is a slower time of the year for loan production.  Hopefully, loan pay downs will slow down also," Blodnick said.

Credit Quality Summary

 At or for the
Nine Months
ended
 At or for the
Six Months
ended
 At or for the
Year ended
 At or for the
Nine Months
ended
(Dollars in thousands)Sep 30,
 2015
 Jun 30,
 2015
 Dec 31,
 2014
 Sep 30,
 2014
Allowance for loan and lease losses       
Balance at beginning of period$129,753  129,753  130,351  130,351 
Provision for loan losses1,873  1,047  1,912  1,721 
Charge-offs(4,671) (2,598) (7,603) (5,567)
Recoveries3,813  2,317  5,093  4,127 
Balance at end of period$130,768  130,519  129,753  130,632 
             
Other real estate owned$26,609  26,686  27,804  28,374 
Accruing loans 90 days or more past due3,784  618  214  1,617 
Non-accrual loans54,632  56,918  61,882  68,149 
Total non-performing assets 1$85,025  84,222  89,900  98,140 
            
Non-performing assets as a percentage of subsidiary assets0.97% 0.98% 1.08% 1.21%
Allowance for loan and lease losses as a percentage of non-performing loans224% 227% 209% 187%
Allowance for loan and lease losses as a percentage of total loans2.68% 2.71% 2.89% 2.93%
Net charge-offs as a percentage of total loans0.02% 0.01% 0.06% 0.03%
Accruing loans 30-89 days past due$17,822  28,474  25,904  17,570 
Accruing troubled debt restructurings$63,638  64,336  69,129  74,376 
Non-accrual troubled debt restructurings$27,442  32,664  33,714  37,482 

__________
1 As of September 30, 2015, non-performing assets have not been reduced by U.S. government guarantees of $2.0 million.

Non-performing assets at September 30, 2015 were $85.0 million, an increase of $803 thousand, or less than 1 percent, during the current quarter.  Non-performing assets at September 30, 2015 decreased $13.1 million, or 13 percent, from a year ago.  Land, lot and other construction loans (i.e., regulatory classification) continues to be the largest category of non-performing assets with $38.6 million, or 45 percent, at September 30, 2015.  The Company has continued to make progress by reducing this category the past few years and the category decreased $4.2 million, or 10 percent, from the prior quarter.  Early stage delinquencies (accruing loans 30-89 days past due) of $17.8 million at September 30, 2015 decreased $10.7 million from the prior quarter and increased $252 thousand from the prior year third quarter.

The allowance for loan and lease losses ("allowance") was $131 million at September 30, 2015 and continued to remain stable compared to the prior periods.  The allowance was 2.68 percent of total loans outstanding at September 30, 2015 compared to 2.89 percent at December 31, 2014 and 2.93 percent for the same quarter last year. The reduction in the allowance as a percentage of total loans was driven primarily by loan growth, stabilizing credit quality, and no allowance carried over from bank acquisitions as a result of the acquired loans recorded at fair value.

Credit Quality Trends and Provision for Loan Losses

(Dollars in thousands) Provision
for Loan
Losses
 Net
Charge-Offs
(Recoveries)
 ALLL
as a Percent
of Loans
 Accruing
Loans 30-89
Days Past Due
as a Percent of
Loans
 Non-Performing
Assets to
Total Subsidiary
Assets
                  
Third quarter 2015 $826  $577  2.68% 0.37% 0.97%
Second quarter 2015 282  (381) 2.71% 0.59% 0.98%
First quarter 2015 765  662  2.77% 0.71% 1.07%
Fourth quarter 2014 191  1,070  2.89% 0.58% 1.08%
Third quarter 2014 360  364  2.93% 0.39% 1.21%
Second quarter 2014 239  332  3.11% 0.44% 1.30%
First quarter 2014 1,122  744  3.20% 1.05% 1.37%
Fourth quarter 2013 1,802  2,216  3.21% 0.79% 1.39%
                

Net charge-offs of loans for the current quarter were $577 thousand compared to net recoveries of $381 thousand for the prior quarter and net charge-offs of $364 thousand from the same quarter last year.  The current quarter provision for loan losses of $826 thousand increased $544 thousand from the prior quarter and increased $466 thousand from the prior year third quarter.  Loan portfolio growth, composition, average loan size, credit quality considerations, and other environmental factors will continue to determine the level of the loan loss provision.

Supplemental information regarding credit quality and identification of the Company's loan portfolio based on regulatory classification is provided in the exhibits at the end of this press release.  The regulatory classification of loans is based primarily on collateral type while the Company's loan segments presented herein are based on the purpose of the loan.

Liability Summary

         $ Change from
(Dollars in thousands)Sep 30,
 2015
 Jun 30,
 2015
 Dec 31,
 2014
 Sep 30,
 2014
 Jun 30,
 2015
 Dec 31,
 2014
 Sep 30,
 2014
                      
Non-interest bearing deposits$1,893,723  1,731,015  1,632,403  1,595,971  162,708  261,320  297,752 
Interest bearing deposits4,779,456  4,827,642  4,712,809  4,510,840  (48,186) 66,647  268,616 
Repurchase agreements441,041  408,935  397,107  367,213  32,106  43,934  73,828 
Federal Home Loan Bank advances329,299  329,470  296,944  366,866  (171) 32,355  (37,567)
Other borrowed funds6,619  6,665  7,311  7,351  (46) (692) (732)
Subordinated debentures125,812  125,776  125,705  125,669  36  107  143 
Other liabilities113,541  103,856  106,181  95,420  9,685  7,360  18,121 
Total liabilities$7,689,491  7,533,359  7,278,460  7,069,330  156,132  411,031  620,161 
                      

The Company continues to generate strong increases in non-interest bearing deposits.  Non-interest bearing deposits of $1.894 billion at September 30, 2015, increased $163 million, or 9 percent, from the prior quarter.  Excluding the CB acquisition, non-interest bearing deposits increased $256 million, or 16 percent, from September 30, 2014.  Interest bearing deposits of $4.779 billion at September 30, 2015 included $190 million of wholesale deposits (i.e., brokered deposits classified as NOW, money market deposits and certificate accounts).  Excluding the decrease of $7.5 million in wholesale deposits, interest bearing deposits at September 30, 2015 decreased $40.6 million, or 1 percent, during the current quarter.  Excluding the CB acquisition, interest bearing deposits at September 30, 2015 increased $164 million, or 4 percent, from September 30, 2014.  "We continue to drive significant organic growth in non-interest bearing deposits, " Blodnick said.  "The current quarter was by far the largest increase we have generated in this deposit category and even exceeds those quarters where we acquired a new bank.  It's a testament to the great work done by all of our banks in adding to and maintaining  their market share.  This large low cost deposit base will serve us well when interest rates begin to rise," Blodnick said.

Securities sold under agreements to repurchase ("repurchase agreements") of $441 million at September 30, 2015 increased $32.1 million, or 8 percent, from the prior quarter and was primarily the result of additions to existing repurchase agreements.  Federal Home Loan Bank ("FHLB") advances of $329 million at September 30, 2015 were unchanged for the current quarter and increased $32.4 million, or 11 percent, since December 31, 2014 as the Company took advantage of attractive term borrowings that were available from the FHLB of Seattle prior to the merger with FHLB of Des Moines during the second quarter of 2015.   FHLB advances decreased $37.6 million, or 10 percent, from September 30, 2014 as growth in deposits and continued balance sheet changes reduced the need for additional borrowings.

Stockholders' Equity Summary

          $ Change from
(Dollars in thousands, except per share data) Sep 30, Jun 30, Dec 31, Sep 30, Jun 30, Dec 31, Sep 30,
     2015      2015      2014      2014    2015   2014   2014 
                             
Common equity $    1,066,801      1,051,011      1,010,303      1,017,805    15,790   56,498   48,996 
Accumulated other comprehensive income    8,007      5,440      17,744      22,675    2,567   (9,737)  (14,668)
Total stockholders' equity    1,074,808      1,056,451      1,028,047      1,040,480    18,357   46,761   34,328 
Goodwill and core deposit intangible, net    (141,624)     (142,344)     (140,606)     (141,323)   720   (1,018)  (301)
Tangible stockholders' equity $    933,184      914,107      887,441      899,157    19,077   45,743   34,027 
                       
Stockholders' equity to total assets    12.26%     12.30     12.38     12.83       
Tangible stockholders' equity to total tangible assets    10.82%     10.82     10.87     11.28       
Book value per common share $    14.23      13.99      13.70      13.87    0.24   0.53   0.36 
Tangible book value per common share $    12.35      12.10      11.83      11.98    0.25   0.52   0.37 
Market price per share at end of period $    26.39      29.42      27.77      25.86    (3.03)  (1.38)  0.53 
                             

Tangible stockholders' equity of $933 million at September 30, 2015 increased $19.1 million, or 2 percent, from the prior quarter due primarily to earnings retention and an increase in accumulated other comprehensive income.  Tangible stockholders' equity increased $34.0 million, or 4 percent, from a year ago the result of earnings retention and Company stock issued in connection with the CB acquisitions, both of which offset the decrease in accumulated other comprehensive income.  Tangible book value per common share of $12.35 increased $0.25 per share from the prior quarter and increased $0.37 per share from the prior year third quarter.

Cash Dividend

On September 30, 2015, the Company's Board of Directors declared a cash dividend of $0.19 per share.  The dividend was payable October 22, 2015 to shareholders of record on October 13, 2015.  Future cash dividends will depend on a variety of factors, including net income, capital, asset quality, general economic conditions and regulatory considerations.

Operating Results for Three Months Ended September 30, 2015
Compared to June 30, 2015 and September 30, 2014

Income Summary

 Three Months ended $ Change from
(Dollars in thousands)Sep 30,
 2015
 Jun 30,
 2015
 Mar 31,
 2015
 Sep 30,
 2014
 Jun 30,
 2015
 Mar 31,
 2015
 Sep 30,
 2014
Net interest income             
Interest income$80,367  78,617  77,486  75,690  1,750  2,881  4,677 
Interest expense7,309  7,369  7,382  6,430  (60) (73) 879 
Total net interest income73,058  71,248  70,104  69,260  1,810  2,954  3,798 
              
Non-interest income             
Service charges, loan fees, and other fees16,030  15,445  14,156  15,661  585  1,874  369 
Gain on sale of loans7,326  7,600  5,430  6,000  (274) 1,896  1,326 
(Loss) gain on sale of investments(31) (98) 5  (61) 67  (36) 30 
Other income2,474  2,855  3,102  2,832  (381) (628) (358)
Total non-interest income25,799  25,802  22,693  24,432  (3) 3,106  1,367 
                      
 $98,857  97,050  92,797  93,692  1,807  6,060  5,165 
                  
Net interest margin (tax-equivalent)3.96% 3.98% 4.03% 3.99%      
                  

Net Interest Income

In the current quarter, interest income of $80.4 million increased $1.8 million, or 2 percent from the prior quarter, such increase attributable to increases in interest income on commercial loans.  Income of $42.1 million on commercial loans increased $1.4 million, or 4 percent, from the prior quarter and was driven primarily by loan volume increases.  Interest income during the current quarter increased $4.7 million, or 6 percent, over the prior year third quarter and was also due to higher interest income on commercial loans.  The current quarter interest income on commercial loans increased $14.2 million, or 13 percent, over the prior year third quarter primarily the result of an increased volume in commercial loans.  Interest income of $22.4 million on investment securities increased $478 thousand, or 2 percent, over the prior quarter and decreased $357 thousand, or 2 percent, over the prior year third quarter.

The current quarter interest expense of $7.3 million decreased $60 thousand, or 1 percent, from the prior quarter.  The current quarter interest expense increased $879 thousand from the prior year third quarter, such increase attributed to the interest expense associated with the interest rate swap which started interest expense accruals in the fourth quarter of 2014.  The total cost of funding (including non-interest bearing deposits) for the current quarter was 39 basis points compared to 40 basis points for the prior quarter and 37 basis points in the prior year third quarter.

The Company's net interest margin as a percentage of earning assets, on a tax-equivalent basis, for the current quarter was 3.96 percent compared to 3.98 percent in the prior quarter. The 2 basis point decrease in the current quarter net interest margin was primarily driven by a 3 basis point reduction in the acquired loan fair value discount accretion.  Included in the current quarter net interest margin was 4 basis points related to the recovery of interest on loans previously placed on non-accrual compared to 1 basis point in the prior quarter.  The Company's current quarter net interest margin decreased 3 basis points from the prior year third quarter net interest margin of 3.99 percent.  The reduction in the net interest margin from the prior year third quarter was the result of a 6 basis point increase in interest expense related to the interest rate swaps.  "The net interest margin for the current and sequential quarter and for the first nine months of the current year have remained stable compared to the year ago quarters and year ago nine month period as the Bank divisions have been disciplined in pricing loans and interest bearing deposits," said Ron Copher, Chief Financial Officer.  "The growth in the non-interest bearing balances has served the Bank well to offset the higher interest expense associated with the interest rate swap."

Non-interest Income

Non-interest income for the current quarter totaled $25.8 million which was stable compared to the prior quarter and an increase of $1.4 million, or 6 percent, over the same quarter last year.  Service fee income of $16.0 million, increased $585 thousand, or 4 percent, from the prior quarter and increased $369 thousand, or 2 percent, from the prior year third quarter with both increases the result of the increased number of deposit accounts.  Gain of $7.3 million on the sale of the residential loans in the current quarter decreased $274 thousand, or 4 percent, from the prior quarter and increased $1.3 million, or 22 percent, from the prior year third quarter as a result of an increase in mortgage purchase activity.  Other non-interest income for the current quarter decreased $381 thousand, or 13 percent, over the prior quarter the result of annual incentives received in the second quarter of 2015.  Other non-interest income decreased $358 thousand, or 13 percent, over the prior year third quarter due to a decrease in other real estate owned ("OREO") income.   Included in other income was operating revenue of $19 thousand from OREO and a gain of $110 thousand from the sale of OREO, a combined total of $129 thousand for the current quarter compared to $323 thousand for the prior quarter and $406 thousand for the prior year third quarter.

Non-interest Expense Summary

 Three Months ended $ Change from
(Dollars in thousands)Sep 30,
 2015
 Jun 30,
 2015
 Mar 31,
 2015
 Sep 30,
 2014
 Jun 30,
 2015
 Mar 31,
 2015
 Sep 30,
 2014
                      
Compensation and employee benefits$33,534  32,729  32,244  30,142  805  1,290  3,392 
Occupancy and equipment7,887  7,810  7,362  6,961  77  525  926 
Advertising and promotions2,459  2,240  1,927  2,141  219  532  318 
Data processing1,258  1,593  1,249  1,472  (335) 9  (214)
Other real estate owned1,047  1,377  758  602  (330) 289  445 
Regulatory assessments and insurance1,478  1,006  1,305  1,435  472  173  43 
Core deposit intangibles amortization720  755  731  692  (35) (11) 28 
Other expenses10,729  12,435  9,921  10,793  (1,706) 808  (64)
                     
Total non-interest expense$59,112  59,945  55,497  54,238  (833) 3,615  4,874 
                      

Compensation and employee benefits for the current quarter increased by $805 thousand, or 2 percent, from the prior quarter.  Compensation and employee benefits for the current quarter increased by $3.4 million, or 11 percent, from the prior year third quarter due to the increased number of employees from the CB acquisition and the First National Bank of the Rockies ("FNBR") acquisition in August 2014, and annual salary increases.  Current quarter occupancy and equipment expense increased $926 thousand, or 13 percent, from the prior year third quarter as a result of added costs associated with the CB and FNBR acquisitions and equipment expense related to additional information technology infrastructure.  The current quarter advertising expense increased $219 thousand, or 10 percent, from the prior quarter and increased $318 thousand, or 15 percent, from the prior year third quarter as a result of the Company actively marketing to its customer base in certain market areas.  The current quarter data processing expense decreased $335 thousand, or 21 percent, from the prior quarter as a result of conversion related expenses and general increases during the prior quarter.  The current quarter data processing expense decreased $214 thousand, or 15 percent, from the prior year third quarter as a result of a decrease in outsourced data processing expense from an acquired bank in the prior year third quarter.  The current quarter OREO expense of $1.0 million was a decrease of $330 thousand from the prior quarter and included $559 thousand of operating expense, $452 thousand of fair value write-downs, and $37 thousand of loss from the sales of OREO.  Current quarter other expenses of $10.7 million decreased by $1.7 million, or 14 percent, from the prior quarter primarily from expenses connected with equity investments in New Market Tax Credits ("NMTC") projects and conversion related expenses which were incurred in the second quarter of 2015.  The NMTC expenses were more than offset by the tax benefits included in federal income tax expense during the second quarter of 2015 which was the reason for the increase of $1.8 million in federal and state income tax during the current quarter.

Efficiency Ratio

The efficiency ratio for the current quarter was 54.32 percent compared to 55.91 percent in the prior quarter.  The  1.59 percent decrease in efficiency ratio resulted from decreases in expenses associated with NMTC projects and increases in net interest income primarily from volume increases in commercial loans and investment securities.  The current quarter efficiency ratio of 54.32 percent compares to 53.87 percent in the prior year third quarter.  The 45 basis point increase in efficiency ratio resulted from increases in non-interest expense driven by increased compensation and other operational expenses, which outpaced the increases in net interest income from an increase in earning assets.

Operating Results for Nine Months ended September 30, 2015
Compared to September 30, 2014

Income Summary

 Nine Months ended $ Change % Change
(Dollars in thousands)Sep 30,
 2015
 Sep 30,
 2014
 
Net interest income       
Interest income$236,470  $223,740  $12,730  6%
Interest expense22,060  19,598  2,462  13%
Total net interest income214,410  204,142  10,268  5%
        
Non-interest income       
Service charges, loan fees, and other fees45,631  43,656  1,975  5%
Gain on sale of loans20,356  14,373  5,983  42%
Loss on sale of investments(124) (160) 36  (23)%
Other income8,431  8,455  (24) %
Total non-interest income74,294  66,324  7,970  12%
 $288,704  $270,466  $18,238  7%
          
Net interest margin (tax-equivalent)3.99% 4.00%    
          

Net Interest Income

Interest income for the first nine months of the current year increased $12.7 million, or 6 percent, from the prior year first nine months and was principally due to an increase in income from commercial loans.  Current year interest income of $122 million on commercial loans increased $14.2 million, or 13 percent, from the prior year first nine months and was primarily the result of an increased volume of commercial loans.  Current year interest income of $67.4 million on investment securities decreased $3.6 million, or 5 percent, over the same period last year, as a result of a decreased rate on investment securities, although the tax effective yield adjustment reduced this decrease to $140 thousand.

Interest expense for the first nine months of the current year increased $2.5 million, or 13 percent, from the prior year first nine months and was primarily due to the interest expense associated with the interest rate swap which started interest expense accruals in the fourth quarter of 2014.  The total funding cost (including non-interest bearing deposits) for the first nine months of 2015 was 40 basis points compared to 39 basis points for the first nine months of 2014.

The net interest margin as a percentage of earning assets, on a tax-equivalent basis, for the first nine months of 2015 was 3.99 percent, a decrease of 1 basis point from the prior year first nine months net interest margin of 4.00 percent.  The 1 basis point reduction was attributable to a combination of items including an increase in interest expense from the interest rate swaps which was partially offset by increases in higher yielding earning assets.

Non-interest Income

Non-interest income of $74.3 million for the first nine months of 2015 increased $8.0 million, or 12 percent, over the same period last year.  Service charges and other fees of $45.6 million for the first nine months of 2015 increased $2.0 million, or 5 percent, from the same period last year driven by the increased number of deposit accounts.  The gains of $20.4 million on the sale of residential loans for the first nine months of 2015 increased $6.0 million, or 42 percent, from the first nine months of 2014 resulting from an increase in mortgage refinancing and purchase activity.  Other income was unchanged from the nine month period last year.  Included in other income was operating revenue of $95 thousand from OREO and gains of $775 thousand from the sales of OREO, which totaled $870 thousand for the first nine months of 2015 compared to $1.8 million for the same period in the prior year.

Non-interest Expense Summary

 Nine Months ended       
(Dollars in thousands)Sep 30,
 2015
 Sep 30,
 2014
 $ Change% Change
              
Compensation and employee benefits$98,507  $87,764  $10,743  12%
Occupancy and equipment23,059  20,307  2,752  14%
Advertising and promotions6,626  5,866  760  13%
Data processing4,100  4,792  (692) (14)%
Other real estate owned3,182  1,675  1,507  90%
Regulatory assessments and insurance3,789  4,055  (266) (7)%
Core deposit intangible amortization2,206  2,095  111  5%
Other expenses33,085  30,427  2,658  9%
Total non-interest expense$174,554  $156,981  $17,573  11%
               

Compensation and employee benefits for the first nine months of 2015 increased $10.7 million, or 12 percent, from the same period last year due to the increased number of employees from the acquired banks, additional benefit costs and annual salary increases.  Occupancy and equipment expense increased $2.8 million, or 14 percent, as a result of increased costs associated with the CB and FNBR acquisitions and equipment expense related to additional information technology infrastructure. Outsourced data processing expense decreased $692 thousand, or 14 percent, from the prior year first nine months as a result of a decrease in conversion related expenses and outsourced data processing expense from an acquired bank.  OREO expense of $3.2 million in the first nine months of 2015 increased $1.5 million, or 90 percent, from the first nine months of the prior year.  OREO expenses tend to fluctuate based on the level of activity in various quarters.  OREO expense for the first nine months of 2015 included $1.4 million of operating expenses, $1.5 million of fair value write-downs, and $250 thousand of loss from the sales of OREO.  Other expense of $33.1 million for the first nine months of 2015 increased by $2.7 million, or 9 percent, from the first nine months of the prior year primarily due to increases in conversion and acquisition related expenses.

Provision for Loan Losses

The provision for loan losses was $1.9 million for the first nine months of 2015, an increase of $152 thousand, or 9 percent, from the same period in the prior year.  Net charged-off loans during the first nine months of 2015 were $858 thousand, a decrease of $582 thousand from the first nine months of 2014.

Efficiency Ratio

The efficiency ratio was 55.01 percent for the first nine months of 2015 and 54.03 percent for the first nine months of 2014.  The increase in the efficiency ratio resulted from compensation expense and increased costs from acquisitions outpacing the increase in net interest income and increases in gain on sale of loans.

About Glacier Bancorp, Inc.

Glacier Bancorp, Inc. is a regional bank holding company providing commercial banking services in 82 communities in Montana, Idaho, Utah, Washington, Wyoming and Colorado. Glacier Bancorp, Inc. is headquartered in Kalispell, Montana, and  is the parent company for Glacier Bank, Kalispell and Bank divisions First Security Bank of Missoula; Valley Bank of Helena; Big Sky Western Bank, Bozeman; Western Security Bank, Billings; and First Bank of Montana, Lewistown, all operating in Montana; as well as Mountain West Bank, Coeur d'Alene operating in Idaho, Utah and Washington; Citizens Community Bank, Pocatello, operating in Idaho; 1st Bank, Evanston, operating in Wyoming and Utah;  First Bank of Wyoming, Powell and First State Bank, Wheatland,   each operating in Wyoming; North Cascades Bank, Chelan, operating in Washington; and Bank of the San Juans, Durango, operating in Colorado.

Forward-Looking Statements

This news release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  These forward-looking statements include, but are not limited to, statements about management's plans, objectives, expectations and intentions that are not historical facts, and other statements identified by words such as "expects," "anticipates," "intends," "plans," "believes," "should," "projects," "seeks," "estimates" or words of similar meaning.  These forward-looking statements are based on current beliefs and expectations of management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the Company's control.  In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change.  The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations in the forward-looking statements, including those set forth in this news release:

  • the risks associated with lending and potential adverse changes of the credit quality of loans in the Company's portfolio;
  • changes in market interest rates, which could adversely affect the Company's net interest income and profitability;
  • legislative or regulatory changes that adversely affect the Company's business, ability to complete pending or prospective future acquisitions, limit certain sources of revenue, or increase cost of operations;
  • costs or difficulties related to the completion and integration of acquisitions;
  • the goodwill the Company has recorded in connection with acquisitions could become impaired, which may have an adverse impact on earnings and capital;
  • reduced demand for banking products and services;
  • the risks presented by public stock market volatility, which could adversely affect the market price of the Company's common stock and the ability to raise additional capital or grow the Company through acquisitions;
  • consolidation in the financial services industry in the Company's markets resulting in the creation of larger financial institutions who may have greater resources could change the competitive landscape;
  • dependence on the Chief Executive Officer, the senior management team and the Presidents of the Bank divisions;
  • potential interruption or breach in security of the Company's systems; and
  • the Company's success in managing risks involved in the foregoing.

The Company does not undertake any obligation to publicly correct or update any forward-looking statement if it later becomes aware that actual results are likely to differ materially from those expressed in such forward-looking statement.

 
Glacier Bancorp, Inc.
Unaudited Condensed Consolidated Statements of Financial Condition
        
(Dollars in thousands, except per share data)September 30,
 2015
 June 30,
 2015
 December 31,
 2014
 September 30,
 2014
Assets       
Cash on hand and in banks$104,363  120,783  122,834  109,947 
Federal funds sold2,210    1,025  488 
Interest bearing cash deposits136,262  234,936  318,550  171,662 
Cash and cash equivalents242,835  355,719  442,409  282,097 
Investment securities, available-for-sale2,530,994  2,361,830  2,387,428  2,398,196 
Investment securities, held-to-maturity651,822  593,314  520,997  482,757 
Total investment securities3,182,816  2,955,144  2,908,425  2,880,953 
Loans held for sale40,456  53,201  46,726  65,598 
Loans receivable4,876,419  4,807,431  4,488,095  4,459,099 
Allowance for loan and lease losses(130,768) (130,519) (129,753) (130,632)
Loans receivable, net4,745,651  4,676,912  4,358,342  4,328,467 
Premises and equipment, net185,864  186,858  179,175  178,509 
Other real estate owned26,609  26,686  27,804  28,374 
Accrued interest receivable46,786  44,563  40,587  42,981 
Deferred tax asset55,095  56,571  41,737  44,452 
Core deposit intangible, net10,781  11,501  10,900  11,617 
Goodwill130,843  130,843  129,706  129,706 
Non-marketable equity securities24,905  24,914  52,868  52,868 
Other assets71,658  66,898  67,828  64,188 
Total assets$8,764,299  8,589,810  8,306,507  8,109,810 
Liabilities       
Non-interest bearing deposits$1,893,723  1,731,015  1,632,403  1,595,971 
Interest bearing deposits4,779,456  4,827,642  4,712,809  4,510,840 
Securities sold under agreements to repurchase441,041  408,935  397,107  367,213 
FHLB advances329,299  329,470  296,944  366,866 
Other borrowed funds6,619  6,665  7,311  7,351 
Subordinated debentures125,812  125,776  125,705  125,669 
Accrued interest payable3,641  3,790  4,155  3,058 
Other liabilities109,900  100,066  102,026  92,362 
Total liabilities7,689,491  7,533,359  7,278,460  7,069,330 
Stockholders' Equity       
Preferred shares, $0.01 par value per share, 1,000,000  shares authorized, none issued or outstanding       
Common stock, $0.01 par value per share, 117,187,500  shares authorized755  755  750  750 
Paid-in capital720,639  720,073  708,356  707,821 
Retained earnings - substantially restricted345,407  330,183  301,197  309,234 
Accumulated other comprehensive income8,007  5,440  17,744  22,675 
Total stockholders' equity1,074,808  1,056,451  1,028,047  1,040,480 
Total liabilities and stockholders' equity$8,764,299  8,589,810  8,306,507  8,109,810 
Number of common stock shares issued and outstanding75,532,082  75,531,258  75,026,092  75,024,092 
            


    
Glacier Bancorp, Inc.
Unaudited Condensed Consolidated Statements of Operations 
    
 Three Months ended Nine Months ended
(Dollars in thousands, except per share data)September 30,
 2015
 June 30,
 2015
 September 30,
 2014
 September 30,
 2015
 September 30,
 2014
Interest Income         
Investment securities$22,437  21,959  22,794  67,355  71,002 
Residential real estate loans7,878  7,942  7,950  23,581  22,257 
Commercial loans42,137  40,698  37,387  121,857  107,696 
Consumer and other loans7,915  8,018  7,559  23,677  22,785 
Total interest income80,367  78,617  75,690  236,470  223,740 
Interest Expense         
Deposits3,947  4,112  3,027  12,206  9,177 
Securities sold under agreements to repurchase261  232  225  734  627 
Federal Home Loan Bank advances2,273  2,217  2,356  6,685  7,317 
Federal funds purchased and other borrowed funds21  15  34  63  135 
Subordinated debentures807  793  788  2,372  2,342 
Total interest expense7,309  7,369  6,430  22,060  19,598 
Net Interest Income73,058  71,248  69,260  214,410  204,142 
Provision for loan losses826  282  360  1,873  1,721 
Net interest income after provision for loan losses72,232  70,966  68,900  212,537  202,421 
Non-Interest Income         
Service charges and other fees14,975  14,303  14,319  42,277  40,085 
Miscellaneous loan fees and charges1,055  1,142  1,342  3,354  3,571 
Gain on sale of loans7,326  7,600  6,000  20,356  14,373 
Loss on sale of investments(31) (98) (61) (124) (160)
Other income2,474  2,855  2,832  8,431  8,455 
Total non-interest income25,799  25,802  24,432  74,294  66,324 
Non-Interest Expense         
Compensation and employee benefits33,534  32,729  30,142  98,507  87,764 
Occupancy and equipment7,887  7,810  6,961  23,059  20,307 
Advertising and promotions2,459  2,240  2,141  6,626  5,866 
Data processing1,258  1,593  1,472  4,100  4,792 
Other real estate owned1,047  1,377  602  3,182  1,675 
Regulatory assessments and insurance1,478  1,006  1,435  3,789  4,055 
Core deposit intangibles amortization720  755  692  2,206  2,095 
Other expenses10,729  12,435  10,793  33,085  30,427 
Total non-interest expense59,112  59,945  54,238  174,554  156,981 
Income Before Income Taxes38,919  36,823  39,094  112,277  111,764 
Federal and state income tax expense9,305  7,488  9,800  25,658  27,063 
Net Income$29,614  29,335  29,294  86,619  84,701 
Basic earnings per share$0.39  0.39  0.40  1.15  1.14 
Diluted earnings per share$0.39  0.39  0.40  1.15  1.14 
Dividends declared per share$0.19  0.19  0.17  0.56  0.50 
Average outstanding shares - basic75,531,923  75,530,591  74,631,317  75,424,147  74,512,806 
Average outstanding shares - diluted75,586,453  75,565,655  74,676,124  75,469,355  74,554,263 
               


    
Glacier Bancorp, Inc.
Average Balance Sheet
    
 Three Months ended Nine Months ended
 September 30, 2015 September 30, 2015
(Dollars in thousands)Average
Balance
 Interest &
Dividends
 Average
Yield/
Rate
 Average
Balance
 Interest &
Dividends
 Average
Yield/
Rate
Assets           
Residential real estate loans$679,037  $7,878  4.64% $673,084  $23,581  4.67%
Commercial loans 13,510,098  42,811  4.84% 3,411,631  123,759  4.85%
Consumer and other loans639,155  7,915  4.91% 625,726  23,677  5.06%
Total loans 24,828,290  58,604  4.82% 4,710,441  171,017  4.85%
Tax-exempt investment securities 31,334,980  19,511  5.85% 1,317,788  57,026  5.77%
Taxable investment securities 41,930,378  10,063  2.09% 1,894,572  30,472  2.14%
Total earning assets8,093,648  88,178  4.32% 7,922,801  258,515  4.36%
Goodwill and intangibles142,031      141,851     
Non-earning assets384,452      385,216     
Total assets$8,620,131      $8,449,868     
Liabilities           
Non-interest bearing deposits$1,793,899  $  % $1,702,459  $  %
NOW accounts1,387,334  264  0.08% 1,347,658  790  0.08%
Savings accounts763,430  90  0.05% 740,905  263  0.05%
Money market deposit accounts1,349,244  514  0.15% 1,330,212  1,544  0.16%
Certificate accounts1,125,276  1,657  0.58% 1,147,820  5,284  0.62%
Wholesale deposits 5190,724  1,422  2.96% 208,640  4,325  2.77%
FHLB advances329,797  2,273  2.70% 315,068  6,685  2.80%
Repurchase agreements and  other borrowed funds512,807  1,089  0.84% 504,787  3,169  0.84%
Total funding liabilities7,452,511  7,309  0.39% 7,297,549  22,060  0.40%
Other liabilities92,955      90,300     
Total liabilities7,545,466      7,387,849     
Stockholders' Equity           
Common stock755      754     
Paid-in capital720,325      717,424     
Retained earnings344,768      329,630     
Accumulated other comprehensive income8,817      14,211     
Total stockholders' equity1,074,665      1,062,019     
Total liabilities and stockholders' equity$8,620,131      $8,449,868     
Net interest income (tax-equivalent)  $80,869      $236,455   
Net interest spread (tax-equivalent)    3.93%     3.96%
Net interest margin (tax-equivalent)    3.96%     3.99%

__________
1    Includes tax effect of $674 thousand and $1.9 million on tax-exempt municipal loan and lease income for the three and nine months ended September 30, 2015.
2   Total loans are gross of the allowance for loan and lease losses, net of unearned income and include loans held for sale.  Non-accrual loans were included in the average volume for the entire period.
3    Includes tax effect of $6.8 million and $19.1 million on tax-exempt investment security income for the three and nine months ended September 30, 2015.
4    Includes tax effect of $362 thousand and $1.1 million on federal income tax credits for the three and nine months ended September 30, 2015.
5    Wholesale deposits include brokered deposits classified as NOW, money market deposit and certificate accounts.

    
Glacier Bancorp, Inc.
Loan Portfolio by Regulatory Classification
    
 Loans Receivable, by Loan Type % Change from
(Dollars in thousands)Sep 30,
 2015
 Jun 30,
 2015
 Dec 31,
 2014
 Sep 30,
 2014
 Jun 30,
 2015
 Dec 31,
 2014
 Sep 30,
 2014
Custom and owner occupied construction$64,951  $56,460  $56,689  $59,121  15% 15% 10%
Pre-sold and spec construction46,921  45,063  47,406  44,085  4% (1)% 6%
Total residential construction111,872  101,523  104,095  103,206  10% 7% 8%
Land development83,756  78,059  82,829  88,507  7% 1% (5)%
Consumer land or lots98,490  98,365  101,818  99,003  % (3)% (1)%
Unimproved land74,439  76,726  86,116  66,684  (3)% (14)% 12%
Developed lots for operative builders13,697  13,673  14,126  15,471  % (3)% (11)%
Commercial lots22,937  20,047  16,205  16,050  14% 42% 43%
Other construction122,347  126,966  150,075  149,207  (4)% (18)% (18)%
Total land, lot, and other construction415,666  413,836  451,169  434,922  % (8)% (4)%
Owner occupied885,736  874,651  849,148  834,742  1% 4% 6%
Non-owner occupied739,057  718,024  674,381  658,429  3% 10% 12%
Total commercial real estate1,624,793  1,592,675  1,523,529  1,493,171  2% 7% 9%
Commercial and industrial619,688  635,259  547,910  573,617  (2)% 13% 8%
Agriculture386,523  374,258  310,785  317,506  3% 24% 22%
1st lien801,705  802,152  775,785  782,116  % 3% 3%
Junior lien67,351  67,019  68,358  71,678  % (1)% (6)%
Total 1-4 family869,056  869,171  844,143  853,794  % 3% 2%
Multifamily residential189,944  195,674  160,426  168,760  (3)% 18% 13%
Home equity lines of credit359,605  356,077  334,788  322,442  1% 7% 12%
Other consumer154,095  147,427  133,773  139,045  5% 15% 11%
Total consumer513,700  503,504  468,561  461,487  2% 10% 11%
Other185,633  174,732  124,203  118,234  6% 49% 57%
Total loans receivable, including loans held for sale4,916,875  4,860,632  4,534,821  4,524,697  1% 8% 9%
Less loans held for sale 1(40,456) (53,201) (46,726) (65,598) (24)% (13)% (38)%
Total loans receivable$4,876,419  $4,807,431  $4,488,095  $4,459,099  1% 9% 9%

 _______

 1 Loans held for sale are primarily 1st lien 1-4 family loans.  

        
Glacier Bancorp, Inc.
Credit Quality Summary by Regulatory Classification
        
  

Non-performing Assets, by Loan Type
 Non-
Accrual
Loans
 Accruing
Loans 90 
Days or 
More Past 
Due
 Other
Real Estate
Owned
(Dollars in thousands)Sep 30,
 2015
 Jun 30,
 2015
 Dec 31,
 2014
 Sep 30,
 2014
 Sep 30,
 2015
Sep 30,
 2015
Sep 30,
 2015
Custom and owner occupied construction$1,048  1,079  1,132  1,164  1,048     
Pre-sold and spec construction  18  218  222       
Total residential construction1,048  1,097  1,350  1,386  1,048     
Land development17,719  20,405  20,842  24,803  7,769    9,950 
Consumer land or lots2,430  2,647  3,581  3,451  1,105    1,325 
Unimproved land12,055  12,580  14,170  13,659  8,607    3,448 
Developed lots for operative builders492  848  1,318  1,672  270    222 
Commercial lots1,631  2,050  2,660  2,697  241    1,390 
Other construction4,244  4,244  5,151  5,154      4,244 
Total land, lot and other construction38,571  42,774  47,722  51,436  17,992    20,579 
Owner occupied12,719  13,057  13,574  14,913  8,220  1,444  3,055 
Non-owner occupied3,833  3,179  3,013  3,768  2,713    1,120 
Total commercial real estate16,552  16,236  16,587  18,681  10,933  1,444  4,175 
Commercial and industrial5,110  5,805  4,375  4,833  4,868  199  43 
Agriculture3,114  2,769  3,074  3,430  2,499  167  448 
1st lien11,953  9,867  9,580  13,236  10,538  107  1,308 
Junior lien660  739  442  481  660     
Total 1-4 family12,613  10,606  10,022  13,717  11,198  107  1,308 
Multifamily residential    440  450       
Home equity lines of credit6,013  4,742  6,099  3,985  5,991  22   
Other consumer204  164  231  222  103  45  56 
Total consumer6,217  4,906  6,330  4,207  6,094  67  56 
Other1,800  29        1,800   
Total$85,025  84,222  89,900  98,140  54,632  3,784  26,609 
                      


    
Glacier Bancorp, Inc.
Credit Quality Summary by Regulatory Classification (continued)
    
 Accruing 30-89 Days Delinquent Loans, 
by Loan Type
 % Change from
(Dollars in thousands)Sep 30,
 2015
 Jun 30,
 2015
 Dec 31,
 2014
 Sep 30,
 2014
 Jun 30,
 2015
 Dec 31,
 2014
 Sep 30,
 2014
Custom and owner occupied construction$138  $  $  $  n/m  n/m  n/m 
Pre-sold and spec construction144    869  179  n/m  (83)% (20)%
Total residential construction282    869  179  n/m  (68)% 58%
Consumer land or lots266  158  391  62  68% (32)% 329%
Unimproved land304  755  267  1,177  (60)% 14% (74)%
Developed lots for operative builders      21  n/m  n/m  (100)%
Commercial lots  66  21  106  (100)% (100)% (100)%
Other construction      660  n/m  n/m  (100)%
Total land, lot and other construction570  979  679  2,026  (42)% (16)% (72)%
Owner occupied2,497  4,727  5,971  4,341  (47)% (58)% (42)%
Non-owner occupied5,529  8,257  3,131  266  (33)% 77% 1,979%
Total commercial real estate8,026  12,984  9,102  4,607  (38)% (12)% 74%
Commercial and industrial2,774  6,760  2,915  3,376  (59)% (5)% (18)%
Agriculture867  353  994  152  146% (13)% 470%
1st lien2,510  2,891  6,804  3,738  (13)% (63)% (33)%
Junior lien228  335  491  275  (32)% (54)% (17)%
Total 1-4 family2,738  3,226  7,295  4,013  (15)% (62)% (32)%
Multifamily Residential114  671    684  (83)% n/m  (83)%
Home equity lines of credit1,599  2,464  1,288  1,725  (35)% 24% (7)%
Other consumer811  996  928  789  (19)% (13)% 3%
Total consumer2,410  3,460  2,216  2,514  (30)% 9% (4)%
Other41  41  1,834  19  % (98)% 116%
Total$17,822  $28,474  $25,904  $17,570  (37)% (31)% 1%

_______

n/m - not measurable

      
Glacier Bancorp, Inc. 
Credit Quality Summary by Regulatory Classification (continued)
      
 Net Charge-Offs (Recoveries), Year-to-Date
Period Ending, By Loan Type
 Charge-Offs Recoveries
(Dollars in thousands)Sep 30,
 2015
 Jun 30,
 2015
 Dec 31,
 2014
 Sep 30,
 2014
 Sep 30,
 2015
Sep 30,
 2015
Pre-sold and spec construction$(34) (23) (94) (58)   34 
Land development(293) (807) (390) (319) 828  1,121 
Consumer land or lots(8) (77) 375  69  306  314 
Unimproved land(152) (86) 52  (186)   152 
Developed lots for operative builders(72) (98) (140) (125) 51  123 
Commercial lots(5) (3) (6) (5)   5 
Other construction(1) (1)       1 
Total land, lot and other construction(531) (1,072) (109) (566) 1,185  1,716 
Owner occupied249  271  669  201  587  338 
Non-owner occupied105  109  (162) (44) 116  11 
Total commercial real estate354  380  507  157  703  349 
Commercial and industrial1,011  1,007  1,069  932  1,638  627 
Agriculture(8) (7) 28  (1)   8 
1st lien(80) (49) 372  207  39  119 
Junior lien(106) (129) 183  199  79  185 
Total 1-4 family(186) (178) 555  406  118  304 
Multifamily residential(318) (29) 138  138    318 
Home equity lines of credit531  206  190  222  660  129 
Other consumer39  (3) 226  210  367  328 
Total consumer570  203  416  432  1,027  457 
Total$858  281  2,510  1,440  4,671  3,813 
                   

Visit our website at www.glacierbancorp.com

CONTACT:  Michael J. Blodnick (406) 751-4701 Ron J. Copher (406) 751-7706
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